SAP has avoided a fine from the European Union (EU) after reaching an agreement with Eurocrats around making it easier for customers to mix-and-match maintenance and support services (M&S).

Back in September last year, the European Commission (EC) opened a formal investigation into EU competition concerns relating to SAP’s after-market support services for on-premises ERP software. Its preliminary finding was that SAP has been engaging in four practices that could restrict competition in the EEA-wide market for M&S services for SAP’s on-premises ERP software and indicated abuse of its market position.

These were that the firm was preventing customers from terminating maintenance and support services for unused software licences, which may have resulted in SAP’s customers paying for unwanted services. In addition it has been charging re-instatement and back-maintenance fees to customers who subscribe to SAP’s maintenance and support after a period of absence, in some cases charging fees that corresponded to the amount customers would have paid if they had stayed with SAP all along.

SAP was also deemed to be systematically extending the duration of the initial term of on-premises ERP licences, during which termination of M&S services was not possible; and requiring its M&S customers to seek maintenance and support services from SAP for all their SAP on-premises ERP software, and choose the same type of maintenance and support under the same pricing conditions for all their SAP on-premises ERP software. This, according to the Commission, might prevent customers from “mixing and matching” maintenance and support services from different suppliers at different price and support levels despite it being more convenient for them.

Fixing it 

SAP has now made commitments that are legally binding under EU anti-trust rules and will remain in force globally for a decade that are intended to clarify the conditions for splitting customers’ SAP landscape into separate parts, allowing customers to choose different M&S providers, different levels of support from SAP, or indeed none at all for each part.

Customers will now also be able to terminate their licences and the respective M&S fees  if SAP reduces service levels for products in the final M&S phase or if customers go bankrupt or insolvent. In the event of a user reducing its headcount by 10% or more over a period of two years, customers can also look to reduce their licence and related M&S costs by 10%. Meanwhile if a user divests itself of part of its business, customers will be able to transfer the licences to the buyer, transfer part of the licences to the buyer and terminate the remainder, or terminate all the licences if the buyer doesn’t want the SAP software!

Reaction 

Teresa Ribera, Executive Vice-President for Clean, Just and Competitive Transition, at the European Commission says that the concession give SAP customers more freedom when it comes M&S procurement and payment:

The legally binding commitments secured by the Commission set a benchmark for the industry more broadly and should serve as a warning against similar practices in the cloud markets, where customers are increasingly moving. This decision sends a strong message: dominant firms in digital markets and beyond should not abuse their power to lock in users at the expense of choice and innovation.

For its part, SAP says it remains committed to open competition, customer choice and innovation, but noted:

As the only Fortune 50 technology company headquartered in Europe, SAP’s maintenance practices are aligned with industry standards and offer customers a broad range of deployment, licensing and maintenance options across on-premise and cloud environments.

On the new commitments, the firm says these will strengthen customer choice and predictability by making policies more transparent and introducing targeted flexibility for exceptional shelfware situations:

Our updated policies will apply to all current and future SAP customers worldwide for all of SAP’s on-premise products. Taken together, they represent one of the most customer-friendly maintenance and support approaches in the business software industry, and they set a leading example of what customers can expect from SAP. This further flexibility will not come at cost of business continuity, reliability, and scale, of course.

The firm reached agreement with the Commission in association with SAP customer representatives.  Jens Hungershausen, Chairman of the Executive Board of DSAG. the German-Speaking User Group, commented:

From the perspective of DSAG member companies, this is an important step in the right direction. The provided flexibility will help more customers to make the right decisions regarding their SAP system architecture. Even with SAP’s cloud-based strategy, it is important to decide on your own how to proceed with systems that still have a positive impact on the company and there’s no need to shut them down. We see this development as the result of our effort to drive an ongoing dialogue and partnership between SAP and the customer community on such improvements. These commitments will deliver tangible benefits for customers and strengthen trust while keeping customer choice and flexibility at the center.

The new commitment only relate to on-premises SAP implementations, In terms of its cloud offerings, the firm says:

Our cloud offerings continue to evolve through ongoing innovation in areas like SAP S/4HANA Cloud, RISE with SAP, and our broader cloud portfolio and are unaffected by these changes. However, the added clarity and flexibility support customers as they modernize toward an AI-enabled autonomous enterprise at their own pace.

My take

We believe these commitments establish a new benchmark for customer-friendly practices in the enterprise software industry.

A useful development for a large tranche of customers.

Onwards!